"I suspect that whatever cannot be said clearly is probably not being thought clearly either" --- Peter Singer. (Mea culpa.) See the entry in my Quotes blog.

Saturday, November 25, 2006

Fad Fading

“If you want to pick a fight with a free-market economist,” starts a BusinessWeek story [1], “say something nice about the minimum wage.”

I’ve been up against some heavyweight economists about the benefits of unlicensed spectrum uses like Wi-Fi. For most if not all mainline economists, markets are the best way to allocate spectrum; unlicensed, in their view, wastes society’s resources. It’s therefore reassuring to see a story that shows how economic opinion evolves – even though my argument for some unlicensed allocations is based on regulatory balance rather than economic analysis.

Like all conclusions, even ones from the hard sciences, the received wisdom of economics shifts over time. Since the economics used in policy debates belongs more in the Humanities than the Sciences, it shouldn’t surprise anyone when “the obvious” changes – no more than when a food type or lifestyle choice goes from healthy to dangerous and back again.

The punch line of the BW story, and this post:

“But the economics profession is far less united against the minimum wage than it was a generation ago. Since the early 1990s an influential group of economists has poked holes in the once strongly held belief that the minimum wage is a major job killer. And now there's economic research disputing the rest of the conventional wisdom. Some economists are saying that minimum-wage increases have a ripple effect, bumping up the pay of a large portion of the working poor.”

Caveat: the main evidence cited comes from a labor-supported Washington think tank. Cue FX: the sound of an axe being ground. I guess I shouldn't hold my breath for free-market economists to change their minds...